FISCAL DEFICIT FINANCING AND ECONOMIC GROWTH IN NIGERIA
Abstract
The study investigates the impact of fiscal financing on economic growth in Nigeria for the period (1981 - 2023). The main objective is to examine the impact of fiscal deficit financing on the Real Gross Domestic Product (RGDP), with specific objectives focusing on the effect of External Deficit Financing (EDF), and domestic deficit financing (DDF), as well as the role of Gross Fixed Capital Formation (K), Interest Rate (INR), Exchange Rate (EXR). This research employs an econometric approach using the Ordinary Least Squares (OLS) method, with secondary data sourced from the Central Bank of Nigeria, National Bureau of Statistics, and World Bank. The findings reveal that EDF positively impacts RGDG, boosting growth through improved liquidity, while DDF negatively affects growth by crowding out private investment. Additionally, a stable exchange rate and capital investment significantly promote economic growth, whereas high interest rates hinder it. Based on these results, the study recommends that the Nigerian government should prioritize external borrowing for growth - enhancing projects, strengthen domestic revenue collection to reduce reliance on domestic borrowing, develop a balanced debt management strategy, and channel resources from deficit financing into key sectors like infrastructure, technology, and agriculture. These measures aim to stimulate sustainable economic development and improve living standard in Nigeria.
Full-Text Access Notice
In accordance with the NERD Policy on promoting peer-reviewed publication, public access to the full text of a project, thesis or dissertation is restricted for three years, allowing the author and supervisors sufficient time to pursue peer-reviewed publication.
During this period, researchers with legitimate academic or research purposes may request authorisation directly from the author to enable NERD to release the indexed full texts of the work using the form below.